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Multiple Choice: Choose the BEST answer. 1. Expenses are incurred 5. Which of the following transactions A. To produce assets. results in an increase in expenses? B. To produce liabilities. A. Repayment of principal of bank loan. C. To generate revenue. B. Purchase of office equipment on D. Only during the adjustment process. credit. C. Cost of employee salaries. 2 Which of the following is an example of an accrual? D. Payment on accounts payable. A. Salaries incurred but not yet paid. B. The purchase of office supplies. C. Payment of two years' insurance in advance. True or False: Before each statement, D. Tuition revenue collected in advance. write SCI if the statement is TRUE or SFP if the statement is FALSE. 3. Which of the following is not an application of accrual accounting? _3. The revenue earned by a A. Recording advertising revenues at the time merchandising business from its sales of the work is done. B. Recording telephone expense when the goods is commonly referred to as sales. monthly bill is received. 4. If income is greater than C. Recording advertising revenues at the time expenses, the difference is loss. the cash payment is received. 5. A statement of comprehensive D. Adjusting unearned advertising revenues to income that shows expenses by their the proper balance at the end of the month. function is referred to as prepared using Which of the following accounts is an income a multi-step approach. statement account? 7. Expenses are decreases in A. Salaries Expense economic benefits during the period in B. Accounts Receivable the form of outflows or depletions of C. Salaries Payable D. Owner's Capital PROFIT assets or increases of liabilities that result in decreases in equity. LOSS 8. Expenses encompass both expenses and losses